Cotton Futures Edge Lower

Cotton futures fell below $0.87 per pound, easing from a more than two-year high as traders took profits following the recent rally driven by concerns over tighter supply. The latest USDA crop progress report showed 39% of US cotton crops rated good or excellent, improving from 37% the previous week, easing some supply concerns. Additionally, export sales declined for the second week. In Brazil, intense heat and severe drought accelerated harvesting, with 88.7% of the crop harvested. However, weather risks remain significant. The El Niño phenomenon is expected to persist through February 2027, potentially affecting crops across key producing regions. In India, below-average monsoon rainfall remains a concern after August precipitation came in 16% below normal, particularly given that nearly half of the country’s farmland lacks irrigation. Meanwhile, heavy rainfall in West Texas linked to Cyclone Eduardo is threatening yields, adding to uncertainty over the global cotton supply outlook.

Cotton futures rose above 90 cents per pound, remaining near a more than two-year high as adverse weather continued to threaten crops. High temperatures and heavy rainfall are damaging crops across key growing regions, while the persistent El Niño phenomenon continues to affect commodity markets. In China, deteriorating crop quality and yield losses could boost demand for imports, including from the US. Meanwhile, US crop conditions continued to worsen, with the USDA’s latest crop progress report showing only 37% of crops rated good to excellent, down from 38% previously. India’s position in the Chinese yarn market has also strengthened, with its share of Chinese yarn imports rising to 21% from 7%, as shipments from the US and Brazil were delayed amid the Middle East conflict and tight fuel supply. However, India is facing its weakest monsoon in nearly two decades, with rainfall expected to finish the season around 15% below the long-term average, posing further risks to cotton output.

Cotton futures traded above 88 cents per pound, reaching its highest level in over two years, as crop conditions deteriorate. The latest USDA crop progress report showed conditions worsening to 38% rated good-to-excellent, down from 40% last week and 46% two weeks prior. Deteriorating weather across key producing regions, marked by drought and rising temperatures, raises the risk of lower yields and tighter global supplies, supporting prices. In Brazil, exports surged 19% in July. Meanwhile, El Niño conditions are projected to strengthen through September, keeping temperatures elevated and threatening yields. In India, plantings have largely recovered following normal July rains that offset a dry June, though August and September precipitation remains critical for final output. Still, the rally has left cotton vulnerable to profit-taking as traders lock in gains.